Question

As of January 1 of the current year, Phyllis Company had accounts receivable of $50,000. The sales for January, February, and March were $120,000, $140,000, and $160,000, respectively. 20% of each month's sales are for cash. Of the remaining 80% (the credit sales), 60% are collected in the month of sale, with the remaining 40% collected in the following month. What is the total cash collected (both from accounts receivable and for cash sales) in the month of March?

Answer 1

The total cash collected in March will be = $153600

Step-by-step explanation:

The collection for the month of March will include 20% amount of total sales for March which were the cash sales, 60% of the amount collected for March's credit sales and 40% amount of February's credit sales.

The cash sales for March were = 160000 * 0.2 = $32000

The credit sales for March were = 160000 - 32000 = $128000

Of this 128000, 60% will be collected in March = 128000 * 0.6 = $76800

The receivables for the February credit sales that will be collected in March are = (140000 * 0.8) * 0.4 = $44800

The total cash collected in March will be = 32000 + 76800 + 44800

The total cash collected in March will be = $153600